Pressure to cut costs drives energy producers to drill for answers

JIM RYDBOM/jrydbom@greeleytribune.com
The sun begins to set behind an oil rig near Colo. 392, just east of the town of Windsor. There has been encouraging data recently that shows hydraulic fracturing can be done safely.

Related Media

As dense oil and natural gas drilling continues to expand throughout the country, the industry is facing increased pressure to reduce costs.

Shareholders demand it. Exploration and production companies need it to fund more drilling. Contractors must have it to remain competitive.

“This is a very costly business,” Marc Edwards, senior vice president of completion and production at Halliburton, said. “It’s a complicated business. The benefits of streamlining the process gives us a big opportunity to reduce costs.”

Edwards spoke Tuesday at the Oklahoma State University Energy Conference in Oklahoma City.

The largest hydraulic fracturing company in the world, Halliburton pumps 18 billion pounds of sand every year.

“Halliburton is the biggest logistics company in the U.S., but it’s not a logistics company,” Edwards said. “Halliburton is the biggest rail company in the U.S., but it’s not a rail company.”

Halliburton and other contractors throughout the country are constantly looking to reduce costs to remain competitive. To help with that, Edward’s department is working on what he calls the “frack of the future.”

Hydraulic fracturing, or fracking, is a critical step in extracting oil and natural gas from shale and other dense rock.

The process also is one of the most expensive parts of a well, requiring hundreds of truckloads of water, sand and other materials to be delivered to each well site.

“We’ve come up with a new fracking truck that allows us to use 20 to 25 percent fewer truckloads,” Edwards said.

The new trucks also stand vertically at the well site, allowing them to take up less space and use gravity to reduce the need for electricity and pumping.

There’s a finite resource in the ground. Your cost is where you can gain a competitive advantage and drive returns.”

Halliburton also is experimenting with controlling fracking operations from field offices rather than from each remote well site.

The effort of Halliburton and the hundreds of other fracking companies and contractors throughout the country is making a difference, said David Lawler, chief operating officer at Oklahoma City-based SandRidge Energy Corp.

Through the combined efforts of contractors and SandRidge’s own improvements, the Oklahoma City company last year shaved about $500,000 off the cost of each well in the Mississippi Lime field in northern Oklahoma.

The company plans to drill 600 wells this year, meaning the upgrades will save SandRidge at least $300 million.

“There’s a finite resource in the ground. Your cost is where you can gain a competitive advantage and drive returns,” Lawler said at the energy conference.

Spending for savings

Besides the benefits from contractors, SandRidge has generated its own savings by investing in electric and pipeline infrastructure throughout the area.

In early 2012, about 35 percent of SandRidge’s Mississippi Lime wells were powered by diesel-fueled electric generators, Lawler said. Today, that number is down to 13 percent, and half of the remaining wells are powered by natural gas instead of diesel.

“What we’re trying to do is stack all these things together. That will make the company successful,” Lawler said.

“We’re looking at multiple aspects to every step in the process.”

It’s a complicated business. The benefits of streamlining the process gives us a big opportunity to reduce costs. — Marc Edwards, senior vice president of completion and production at Halliburton